Streaming video cannibalizing DVD rentals, says Netflix

Netflix CEO Reed Hastings noted that there were millions of subscribers using the Watch Instantly feature, and that Netflix had seen a “substitution effect” among subscribers who do so.

“We are seeing early signs of less DVD usage with some subscribers who are also watching instantly as compared to subscribers who only receive DVDs,” said Hastings. “Time will tell whether this substitution effect is an attribute of early adopters or a mainstream behavior.”

“The phenomenon reinforces the fact that online offerings really do compete with physical media for the same pieces of the movie pie, and that could prove worrisome for Blu-ray as online video continues to grow in popularity. “